The Age of Charity-Clicks

By Richard C. Morais

As we approach the last days before the Christmas holidays, it seems appropriate to point out the era of year-end charitable check-writing is over. We’re in the age of charity-clicks.

The Internet has revolutionized and made more efficient so many industries, but none more so than the charity industry. Consider Foundation Source, a Web-based provider that was created a decade ago by private equity investors intent on bringing the tech-driven efficiencies of the modern bank’s backroom to the sleepy world of private family foundations, then mired in paperwork and bureaucracy.

Foundation Source, headquartered in Fairfield, CT., built its business on outsourcing services: when a private foundation electronically made a grant via Foundation Source’s web-based platform, the service automatically cross-checked the grant recipient wasn’t on any of the dozens of terrorist watch lists maintained by different authorities around the world, such as Hong Kong’s Monetary Authority List, before it electronically sent out the family foundation’s grant. Foundation Source then followed the grant’s journey with the requisite documentation, so it could also take care of all the client’s necessary tax and regulatory filings at Federal and State levels.

When I discovered the then little-known Foundation Source five years ago, the firm’s basic service cost $4,750 for a family foundation to set up, followed by a $4,500 annual maintenance fee plus a charge equal to 0.35% to 0.12% of assets under administration. At the time, studies by the IRS suggested that the green-eyeshade private foundation administrative fees were closer to 1% to 1.5% of assets. Furthermore, by outsourcing the bureaucratic backroom functions of their small, privately-run foundations, families could devote more time to the important work of locating the charities they wanted to be associated with.

Today Foundation Source has 1,000 private foundation clients with assets ranging from $250,000 to $250 million, in total representing $4 billion in charitable assets. More importantly, Foundation Source appears to have made its clients more efficient, more able to give. While large institutions reported a decline in the number of grants made in 2009, Foundation Source’s small-to-medium sized family foundations increased their number of grants by 15%. In 2010, they increased the number of grants by 9%, and the value of their grants by 18%. The number of Foundation Source administered grants of $1 million or more jumped 33%.

This new Internet giving allows families to make their giving very personal, focused and efficient. As H. King McGlaughon, Foundation Source’s chief executive recently wrote, “The 20th century style of philanthropy was to provide funding for the nonprofit community and let them deliver services. The new 21st century model is DIY. The old way depended on passive grant making and large administrative costs. The new way features targeted mission-directed grants and as little overhead as possible.” Penta recently profiled five charismatics in this new era of DIY giving in our cover story, “Smart Giving“.

But Internet-charity has done much more than put the givers in the driving seat. It enables the aged and infirm to participate in charitable causes from their homes, when not long ago they were frozen out due to their lack of mobility.

A December study by Dunham & Company, a consulting firm serving nonprofits, showed that 61% of all donors now give donations on-line, which is impressive, but the stats that really grabbed attention: one in two donors over the age of 60 now give on-line. “The study blows some holes in the conventional thinking about older donors and online giving,” said Rick Dunham, Dunham & Co.’s chief executive.

Fact: older donors “give more frequently online than their younger counterparts” and are “more likely to stay engaged in giving towards the end of the year.”

The moral of all this: The Internet allows us all to give efficiently right until December 31st. I am personally outraged that my aged but hacking parents intend to show me up by giving more frequently and generously than I do by year’s end.

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There are 2 comments

DECEMBER 22, 2011 9:44 P.M.

One Person-Just do it! wrote:

As you know most of us who are on this site are better off than most, and most of us started with nothing or near nothing. Take the time to help one person this Holiday season. Fill a car up with Gas, buy somebody groceries, pay somebody's utility bill, buy somebody some firewood. Remember to give encouraging words always. Somebody helped you. If you don't want to spend to help, volunteer your time at a soup kitchen one day a month, become a big brother. You will be paid back ten fold and will feel better about yourself!! Everyday feed your brain positive things.

FEBRUARY 7, 2012 3:03 P.M.

Asset Based Giving wrote:

In regards to: Charity Clicks, asset based giving , Philanthropy, and charitable giving that promotes true change is possible with the use of today's technology. With the use of social media, web platforms, and mobile apps asset-based giving is more robust and dynamic than ever before. Kudos to those who invent, create, and utilize synergy to make the world a better place by helping others in need with smart giving. http://www.nationalchristian.com/advisors

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Written with Barron’s wit and often contrarian perspective, Penta provides the affluent with advice on how to navigate the world of wealth management, how to make savvy acquisitions ranging from vintage watches to second homes, and how to smartly manage family dynamics.

Richard C. Morais, Penta’s editor, was Forbes magazine’s longest serving foreign correspondent, has won multiple Business Journalist Of The Year Awards, and is the author of two novels: The Hundred-Foot Journey and Buddhaland, Brooklyn. Sonia Talati is Penta’s reporter about town, both online and for the magazine. She previously worked for the Wall Street Journal and various television station affiliates around the country. Sonia has a B.A. in economics from the University of California, Los Angeles, and an M.A. from Columbia University Graduate School of Journalism.